An investment assessment of the Kenyan health provision sector

Simon Sebergsen & Karsten Kure Bagger

Student thesis: Master thesis


The objective of the thesis is to analyse the Kenyan institutional environment with respect to the health provision sector in Nairobi. Specifically, the research question in focus is ”How does formal and informal institutions shape the business environment for foreign investors seeking to invest in the Nairobian health provision sector?”. In order to answer this question in detail the thesis sheds light on; i) how is the Kenyan health provision sector structured, ii) which political-, legal- and economic systems affect the health provision sector, and iii) how do culture, ethics and norms affect the health provision sector. The research question is developed based on the fact that the Kenyan Health provision system is currently going through significant health policy changes, and these changes will increase the importance of private sector participants in order to meet the future demand for healthcare services. Moreover, the institutional environment in Kenya is transforming as the country is about to enter into an East African community (EAC) and adapt a new constitution. The thesis’ findings indicate that although the private healthcare sector already plays a significant role in the health provision sector in Nairobi, the private sector will be even more important going forward. Historically, the government in Kenya has not managed to allocate sufficient funds to healthcare, and this under-financing has made Kenya dependent on donors and private sector participants, both non-profit and for-profit. Recently, the Government of Kenya (GOK) has decided to increase its focus on the poor, and the GOK is willing to cooperate with the private sector in order to meet the growing demand from the middle class. By solely looking at the mismatch between the supply and demand of health provision services, the health provision sector seems to offer great potential for investors. However, the institutional analysis confirms that investors have to recognise the importance of both formal and informal institutions in order to fully grasp the opportunities and challenges in the Nairobian health provision sector. The primary institutional obstacles when doing business in Kenya are the level of corruption and crime, the political and economic instability, and the complex tax system. The EAC Common Market and the new constitution addresses all of the above mentioned challenges, and thus holds great potential to facilitate the development of the private sector healthcare in Kenya. If the GOK manages to implement the policies they have formulated, the stage is set for a stable political and economic environment that will foster a sound business climate in the health provision sector with great potential particularly in the fast growing middle class segment in Nairobi that is estimated to quadruple by 2025.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2010
Number of pages180